Detail of top of Bank of England

Stocks in Europe were down on Wednesday morning, with the FTSE 100 trading lower despite some UK consumer price inflation respite in May, which puts the Bank of England firmly under the spotlight on the eve of its next decision.

Meanwhile, financial markets in New York are closed Wednesday for a public holiday.

The FTSE 100 index traded 21.62 points lower, 0.3%, at 8,169.67. The FTSE 250 was down just 8.16 points at 20,401.77, and the AIM All-Share was down 0.06 of a point at 778.26.

The Cboe UK 100 fell 0.3% at 813.18, the Cboe UK 250 was up 0.1% at 17,786.06, and the Cboe Small Companies was a touch higher at 16,629.70.

In European equities on Wednesday, both the CAC 40 in Paris and the DAX 40 in Frankfurt were down 0.2%.

The pound was quoted at $1.2729 early Wednesday, rising from $1.2693 at the time of the London equities close Tuesday. The euro stood at $1.0734, largely unmoved from $1.0736 late Tuesday. Against the yen, the dollar was trading at JP¥157.75, down from JP¥157.97.

‘UK inflation has finally dropped back to the Bank of England 2% target for the first time since July 2021, led by an easing in food inflation - a by-product of unseasonably poor weather in Britain in May,’ Ebury analyst Matthew Ryan commented.

‘We think that the clear signs of progress towards the BoE’s inflation target may be enough to elicit a dovish tweak in the MPC’s communications on Thursday. There will be no press conference this month, but the statement could hint that a first UK rate cut may be on the way in August. Investors will be paying particularly close attention to the vote on rates, as any additional dissenters in favour of an immediate cut would be an explicit signal that an August rate reduction is in the offing.’

Elsewhere, Wednesday’s economic calendar has eurozone construction output data at 1000 BST.

On the UK election front, Shadow Chancellor Rachel Reeves will outline how Labour’s energy policies will aim to save £300 for families, while Prime Minister Rishi Sunak embarks on his ‘moral mission’ to cut taxes, as campaigning continues.

Reeves will visit the South West and accuse the Conservatives of being ‘staggeringly out of touch with the struggles facing ordinary families’ in comments ahead of the release of May’s inflation data.

She will reiterate Labour’s pledge to make Britain a clean energy superpower by 2030, which the party says will save families up to £300 per year off their energy bills, boost the UK’s energy independence, and create 650,000 good jobs.

The party has pledged £8.3 billion for the publicly owned Great British Energy company, which will invest in clean energy.

The Tories, meanwhile, reiterated their demand that Keir Starmer rule out a series of potential tax measures which they claim would be needed to fill a ‘£38.5 billion black hole’ in Labour’s plans.

Sunak’s party republished a list of 17 tax hikes they say Labour could make, but the ppposition has said they would refuse to be drawn into the trap of responding to each claim.

He said: ‘That’s the choice at this election – lower taxes with the Conservatives or a £2,094 tax hike under Labour that would hammer working families hardest.’

In Asia on Wednesday, shares were mixed. The Shanghai Composite ended down 0.4%, though the Hang Seng in Hong Kong shot up 2.9%, looking set to snap a three-day losing streak. Tokyo’s Nikkei 225 rose 0.2%, and over in Sydney, the S&P/ASX 200 closed 0.1% lower.

The head of China’s central bank said on Wednesday that the economy still faced many challenges, but warned authorities would not resort to huge stimulus measures and instead exercise moderation.

Central bank chief Pan Gongsheng told a financial forum in Shanghai that the economy was struggling with ‘insufficient effective demand, insufficiently smooth domestic circulation, and a marked rise in the complexity, severity and uncertainty of the external environment’.

But he said authorities would ‘avoid major easing or tightening’.

In London, Spectris dropped 7.8%. It cautioned that its 2024 profit could fall marginally shy of consensus, as the supplier of high-tech instruments, test equipment and software noted weaker demand in China.

In its Malvern Panalytical unit, the firm said the tepid China demand, a reduction in battery development, an easing of electric vehicle sales and ‘subdued’ trading in pharmaceuticals will hurt first-half sales and operating profit by £15 million and £10 million.

Spectris noted that is in addition to £15 million and £10 million hits to sales and profit for the first-half due to the firm rolling out a new ERP system earlier this year. Spectris, however, noted that system hit will have no impact on its full-year outturn, as the lost earnings will be retrieved in the second half.

‘As a result of our performance in the first half, and our revised expectations for the second half, we now expect adjusted operating profit to be at, or marginally below, the bottom end of the range of consensus analyst expectations for the full year,’ Spectris cautioned.

Adjusted operating profit consensus stands at £232 million to £259 million, it noted.

In addition, the firm noted Angela Noon will join as chief financial officer, with incumbent Derek Harding moving to the role of president of Spectris Scientific. The changes are with effect September 1. Noon is currently the CFO at Royal Mail and was formerly finance chief of Siemens UK & Ireland, Spectris noted.

Miniature wargames maker Games Workshop rose 8.7%. For the financial year ended June 2, it expects to report core revenue of at least £490 million, a rise of 10% from £445.4 million. Pretax profit of at least £200 million is predicted, a rise of 17% from £170.6 million.

On AIM, Arrow Exploration surged 22%. The oil exploration firm said it has put the first of four Ubaque horizontal wells planned for 2024 into production.

‘The first horizontal well on the Carrizales Norte ’B‘ pad (CNB HZ-1) is exceeding expectations,’ it hailed.

In New York on Tuesday, the Dow Jones Industrial Average rose 0.2%, the S&P 500 added 0.3% and the Nasdaq Composite closed marginally higher.

Brent oil was quoted at $85.11 a barrel early Wednesday, rising from $85.02 late Tuesday. Gold was quoted at $2,331.54 an ounce, up from $2,324.20.

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Issue Date: 19 Jun 2024